Gold trading sideways since early December

No sooner did I take my remaining leave than gold came under pressure. As there fortunately is no causal connection, we shall look for the culprit elsewhere. It is, among other places, to be found in the US. Fed governor Jerome Powell recently remarked that the current high inflation rates would probably not be a thing of the past as quickly as was assumed a few weeks ago. The markets took his comments as an indicator that the Fed will likely accelerate its exit from the bond-buying programme launched in November and could thus for the first time raise key interest rates earlier than previously expected, possibly as early as in June 2022. Yields on two-year US government bonds subsequently rose to their highest level since the beginning of the pandemic, which in turn placed the gold prices under pressure.

Strong US dollar, interest rate hikes

In addition, as a result of the rising market interest rates, the US dollar, already in demand as a safe haven currency due to the uncertainties surrounding the coronavirus Omicron variant, also gained traction, especially after the stock markets briefly took a dive.

Due to rising inflation rates around the globe, several central banks again raised their key interest rates over the past few days, including those of Poland and Brazil on Wednesday. With the higher key interest rates, inflation expectations and rates are likely to recede in the medium term, which could also dampen gold prices.

A look back at the past weeks

No wonder, then, that gold is trading somewhat lighter today than three weeks ago. From US$ 1,858 per ounce on Friday 19 November, US dollar gold prices dropped to 1,762 on 2 December. This week, gold has remained firmly within grasp of the 1,780 mark. This morning, the precious metal is trading slightly lower at 1,775.

The Xetra-Gold price more or less echoed this development, dropping from 52.65 € per gram to a three-week low of exactly 50.00, also on 2 December. This morning, it is expected to start trading just below 50.50.

Focus on upcoming central bank meetings

Despite the approach of the Christmas holidays, the markets are not expected to slow down. Market participants are eagerly awaiting US consumer price data, to be published this afternoon. Analysts expect a record average inflation rate of 6.8 per cent. Coming up next week, the US Fed will meet on Wednesday, the ECB and the Bank of England on Thursday. All three meetings and their results are also highly anticipated.

I wish all readers a wonderful third Advent weekend.